Vacancy fluctuations in a macroeconomic model with a strategic labor input target

Abstract

This study investigates the effects of changes in job-filling and job-separation rates on economic fluctuations using an efficiency wage model. It introduces a relationship between labor input and the strategic labor input target into the model. This framework enables us to analyze situations in which vacancies exist along with employment and unemployment. The response of vacancy to a temporary positive productivity shock is amplified when fewer vacancies are filled and/or more turnovers take place. The simulations indicate that substantial changes in vacancy in response to the positive shock do not necessarily lead to significant employment changes, but depend on the job-filling and job-separation rates. This finding highlights the need to examine not only the change in vacancy but also filling vacancies and turnovers when discussing economic policies.